Tag Archive for: NHS

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The NHS gets “supplier” incentivisation all wrong

(Pic; A&E on a Saturday night)

Incentivisation is a fascinating topic. In a business context, for example in terms of incentivising the right behaviour by suppliers, it can require knowledge of psychology, contract law, finance, economics, and operations management. Most of us in procurement will have seen examples of it going wrong too – indeed, I dedicated a whole chapter in the Bad Buying book to dodgy incentivisation that drove unexpected or simply bad supplier performance.

In the UK’s National Health Service (NHS), the way “the centre” (usually the Department of Health or NHS England) incentivises hospitals and other Trusts that deliver services is very similar to a commercial buyer/supplier relationship. Basically, the centre gives money to Trusts and they agree to aim for certain performance levels.

Now I’ve looked up the cvs of  Sarah-Jane Marsh, National Director of Integrated Urgent and Emergency Care and Deputy Chief Operating Officer, NHS England, and Julian Kelly, Deputy Chief Executive and Chief Financial Officer, NHS England. To be honest, there is nothing in them to suggest that these two are stupid. And yet they have launched one of the daftest and most inappropriate incentivisation-related initiatives I’ve ever seen.

It is in effect a “competition” through which Trusts can receive additional funding for capital expenditure in 2024/5. This is what they say in their letter to Trusts this week.

We recently met with ICB and acute trust leaders to discuss how we best work together to meet the challenge of delivering the agreed target of 76% A&E 4-hour performance during March 2024 so that more patients are seen, treated and discharged in a timely way….

In addition we are now announcing three other routes through which trusts will be eligible for additional capital funding in 2024/25:

  1. The 10 trusts delivering the highest level of 4-hour performance (that means seeing people within 4 hours of their arrival at the accident and emergency department) during March will each receive £2 million.
  2. The 10 trusts who deliver the greatest percentage point improvement in March (compared to January 2024 performance) will each receive £2 million.
  3. The next 10 trusts who deliver the greatest percentage point improvement in March (compared to January 2024 performance) would each receive £1 million.

(It continues…)

So where do we start with this? As I say, I look on it as a supplier incentivisation exercise, and on those grounds I would immediately point out a few major flaws .

  • It was issued on March 12th, and relates to performance in March. So how can Trusts possibly have time to make any significant or lasting changes to their processes to improve A&E within days?  
  • Shouldn’t capital expenditure be allocated based on where it will get the best return rather than on some sort of “Hunger Games trial by A&E”?  You would put money into a collaborative venture with a supplier based on its potential return, not on some spurious “performance measures”, wouldn’t you?
  • Doesn’t relating much of it it to improvement mean those Trusts that were particularly awful in January have more chance of winning then the consistently good Trusts? That seems unfair.
  • How do you stop “gaming” of the process and the data?  I’d pay a few local layabouts to come into A&E with a “bad finger”, see and discharge then in two minutes, then rinse and repeat until my figures look amazing.
  • Indeed, this could lead to patient care that is driven by finance, not needs. See the easy cases in A&E, not those with their leg hanging off…

This strikes me as politically driven, surely the only explanation as to why Kelly and Marsh would take this deeply flawed step. Ministers desperately want some good news from the NHS now in case there is a Spring election. Officials must have been instructed to do this – that must be it? If not, if this really is an NHSE internal initiative, then the NHS really is in even deeper trouble than we thought.

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What does NAO think about NHS Supply Chain?

Last month, the UK National Audit Office published “NHS Supply Chain and efficiencies in procurement”, a report looking particularly at the National Health Service’s Supply Chain organisation. Supply Chain (SC) acts as a central procurement “organisation”service provider”, putting in place contracts for a huge range of goods and services that can be used by hospitals and other NHS organisations.

It has a complex history, going back 50 years or so, which we won’t fully explore here. But after its perceived failure during the pandemic in terms of supplying PPE in particular, it has been going through yet another re-organisation or “transformation”.  The operation of various “category towers” had been outsourced – although the outsourced service providers were actually other NHS procurement organisations in most cases. But now the category work is being brought back in house.

As we might have expected, the report paints a mixed picture but on balance, I would call it a somewhat worrying report. There is still a lot of mistrust between SC and procurement leaders in many health trusts. Much of that is historical, but more needs to be done.

One example of this is the “eDirect” service. SC operates a logistics service, delivering to NHS sites from its own warehouses. But it also runs “eDirect”,  a direct delivery services from suppliers to the NHS – more of a “dropshipping” model, as it were. However, that has not been working well. The report says that procurement route accounted for around £1.5 billion of orders via Supply Chain in 2022-23, but more than a quarter of orders were delivered late, by an average 22 days, between June 2022 and March 2023. I hate making facile comparisons, but Amazon would be horrified if it was providing that level of service.

The mistrust also comes from issues such as the measurement and reporting of “savings” – basically, SCL reports big numbers to justify its existence, but many Trusts don’t recognise the numbers or feel that SCL is really delivering tangible savings they can see in their own organisation. In 2019, the Department of Health set Supply Chain a target to deliver £2.4 billion savings by 2023-24. SC told the NAO that it had exceeded its £2.4 billion savings target as of 2022-23, however NAO did not (or could not) validate this and there seems some confusion over how the rather weird savings methodology was initially agreed.  

So it was interesting to see just yesterday (January 31st) Jacqui Rock, Commercial Director at NHS England, announcing a new unified savings measurement process for the NHS. We’ll see if this solves the problem.

Clearly, there is a lot of change going on in the Supply Chain organisation, and it has not all been plain sailing. I was worried around a year ago when two very good senior executives left Supply Chain suddenly (and not to go to better jobs) – not a sign of a happy ship. So how does NAO rate the effectiveness of the transformation programme? More concerns here;

“Transformation is not being run as a multi-year programme, instead it is managed on a year-by-year business cycle in line with NHSE’s business planning process. Supply Chain has not articulated clearly defined or measurable objectives with a detailed and costed timetable for delivery. There are gaps in Supply Chain’s senior leadership team and an over-reliance on the Chief Executive Officer.  Recruitment of senior staff is being slowed by time taken for the civil service approvals process and the addition of an extra layer of approval for high-cost posts created by its move to NHSE …”

There are two sides to every story of course and some Trusts (and people within them) are guilty of pursuing procurement independence for their own reasons. But those reasons aren’t always selfish and the report is disappointing in the sense that it suggests that Trusts should make more use of Supply Chain, without really explaining why that would be a good thing, other than assuming bigger buyers get better deals.

“Supply Chain estimates that trusts spend approximately £3.4 billion outside of its function. Trusts are largely free to purchase goods outside Supply Chain. Supply Chain estimates that, as at September 2023, trusts’ annual procurement spend through Supply Chain was £4.5 billion with £3.4 billion spent outside of Supply Chain’s function”.

But is this lack of use of SC a good thing or a bad thing?  Trusts cannot be forced into using Supply Chain given their legal independence, so there is always a tensions here, and I do wonder sometimes whether the NHS is just too big. I’ve argued for years – not just in the NHS context – that the benefits of aggregation and centralisation in procurement are almost always over-estimated. Trying to do effective “central procurement” in an organisation that employs 1.4 MILLION people in the UK is perhaps just too much to expect. I wouldn’t take on the Supply Chain CEO role for £1 million a year and a knighthood, so I do have sympathy for the team there, but maybe this is just an impossible task.   

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Babylon’s Burning… the Story of the Failed “AI” Health App

The Sunday Times has really got into its investigations recently, and after its excellent expose of the UK’s HS2 rail programme, last week it looked at another issue with a definite “Bad Buying” angle.

Babylon Health, set up in 2013, was going to revolutionise healthcare. Ali Parsa, the founder, is a serial entrepreneur whose previous venture, Circle Holdings, also had some issues (he stepped down from Circle before he set up Babylon). Circle ran Hinchingbrooke Hospital in England, the first fully outsourced hospital. Initially, it seemed to go well, and Parsa was a highly visible cheerleader for the operation, but after a couple of years, Circle pulled out leaving the NHS to pick up the pieces.

But with Babylon, Parsa seemed to have a real product that could benefit everybody. It was an AI powered diagnostic platform that could tell you what health problem you had after a short online consultation. The “app” scored better than doctors on medical tests, Parsa claimed, and could provide excellent diagnosis and care at a fraction of the current cost. For the permanently hard up health services in the UK and US, it seemed too good to be true – and of course it was. However, Parsa used political connections to win business, as the Times reported. Between 2015 and 2022, the company had 22 meetings with government ministers.

“Babylon’s deals with the NHS, which saw it receive at least £22 million over the past three years alone and helped it to woo investors, were in part due its links with the Conservative Party and the backing of Hancock, the health secretary from 2018 to 2021. The Tories received more than £250,000 in donations from individuals and companies with stakes in Babylon Healthcare, including Hancock, whose failed Tory leadership bid in 2019 received £10,000.”

However, the newspaper’s investigation found high-pressure sales techniques and some claims for the product that were simply false. For example, at the Royal College of Physicians in 2018, Parsa showed how Babylon’s AI used a phone’s camera to analyse the facial expression of a female patient to pick up subtle cues that a doctor might miss. This is how the Times describes it.

“This is a real consultation,” Parsa said on stage. “This is what we have built. None of this is a show.”

It was a show. The facial-analysis tool, a prop for a demo, never made it to market. The “patient” in the video was an executive assistant at Babylon… This sleight of hand was a small example of a culture fixated on form over substance, a trait common in Silicon Valley but dangerous in healthcare.” 

Indeed, the much vaunted AI was little more than a decision tree written in Excel based on doctors’ knowledge. Soon, sceptics began testing it and found that it could easily mistake a heart attack for a less serious panic attack, or an ingrowing toenail for gout. I remember various people on Twitter talking about how dangerous it was and calling out Babylon as a con.

But the firm managed to raise $1.2 billion from investors between 2013 and a stock market float in 2021, and at one point Babylon was valued at some $4.2 billion. But after that float, some badly judged deals started affecting the firm’s finances, just as more expert voices also pointed out the technical failings. For instance, the Royal Wolverhampton NHS Trust signed a ten-year deal for a digital-first GP service that would allow patients to use Babylon’s digital tools. But Babylon cancelled the contract in 2022, saying it just could not afford to invest in the service.

Finally in August this year, the firm collapsed into administration and the remnants were picked up by a couple of trade buyers. Parsa has pretty much disappeared, as has most of his own fortune.

It all reminds me a little of the Theranos scandal – the fake blood testing equipment launched by Elizbeth Holmes (who is now in a US jail). Babylon was not as fake as that, and Parsa is not accused of wrongdoing, but the principal of something that everyone wanted to work, but really was built on sand, is the same. And there is also FOMO – the “fear of missing out”. This is an extract from the Bad Buying book section on Theranos.

“Buying failure come into this because retailer Walgreen’s spent $140 million with Theranos over seven years, hosting around 40 blood-testing centres in their stores. They got very little benefit from that and recovered some $30 million after a lawsuit and settlement following the eventual disclosure of the issues.  Amazingly, as Bad Blood reports, Walgreens’s own laboratory consultant, Kevin Hunter, had seen early on that something wasn’t right with Theranos. But the executive in charge of the programme at Walgreen’s said that the firm should pursue the pilot because of the risk that CVS, their big competitor, would beat them to a Theranos deal.

Again, buyers wanted to believe that something was real, even in the face of mounting evidence that it wasn’t. This relates back to comments around believing the supplier … it is easy for a naïve or gullible buyer to be sucked into believing what the supplier wants them to believe.

Suppliers will take advantage of this tendency – whether it is the relatively innocent “yes, we can install this new IT system in six months” or the more dangerous “this equipment will find hidden bombs”.  And FOMO – the fear of missing out to the competition – is something else suppliers will use, and that can lead to bad decisions.  It’s not just physical goods either. The top consulting firm selling its latest “strategy toolkit” will mention that the potential client’s biggest rival is also very interested”.

One day, there is little doubt that a real AI-powered system will be really useful in the world of medical diagnoses. So maybe Parsa was just ahead of his time?  But that is two of his “innovative” businesses that have cost health services time and money without much benefit in return. So I’d be very careful next time he announces he has a great idea…

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Yet Again, a “Sophisticated” Fraud Hits the NHS

The UK’s National Health Service has for years been a “good” source of Bad Buying fraud and corruption stories.  There are several reasons for that. Firstly, it is huge organisation, employing some 1.3 million people. Secondly, it actually has a pretty good counter-fraud unit, and when fraudsters are discovered, they are often prosecuted, so the news becomes public domain, whereas private sector firms often hush up embarrassing cases. But it has to be said – the cases I’ve seen over the years often also suggest that too many NHS organisations have very weak policies and processes around procurement and payments.

The latest case reported in the media recently saw Thomas Elrick, 56, jailed for 3 years and 8 months.  He was assistant managing director for planned and unscheduled care at Harrow Clinical Commissioning Group (CCG) where he had the authority to approve invoices up to £50,000. That organisation is a purchaser rather than a direct provider of healthcare – so it buys services from providers on behalf of the local citizens. 

Elrick created a company, Tree of Andre Therapy Services Limited, using the name of his husband (who knew nothing about it) as the owner, and invoiced the Trust for services that were never provided. Between August 2018 and December 2020 he authorised payments totalling £564,484. To cover his tracks, he also sent an email from the account of his dead wife which claimed to show details of patients the firm had “treated”.

Elrick spent over £100,000 on holidays to Dubai, Hong Kong, the Maldives, Singapore and Switzerland, and also spent just under half a million on shopping, with Amazon, Apple and David Lloyd gyms. But eventually a smart colleague decided to look up the Care Quality Commission accreditation for this firm and found of course that it did not have one, and then the connection to Elrick was found.

There is an interesting angle here in terms of his response. In a statement after he was sentenced, Elrick said “I wish I could turn back the clock but I know that I cannot and I sincerely apologise…  I am not a bad person. I believe that I am fundamentally a good person who made bad decisions, for which I take sole responsibility.” 

Self-delusion is an amazing thing, isn’t it?  I stole half a million from the NHS but I am “fundamentally a good person”.  The mind of a fraudster is often interesting, I suspect.   

But we have to ask how on earth this fraud was possible?  In my Bad Buying book, I give seven key anti-fraud precautions every organisation should follow and this case study and organisation broke several of them. There was no check on the onboarding of a substantial new supplier, which had no trading record, no CCG listing and a conflict of interest in the ownership (although that might not have been easily spotted). There was no check apparently that services paid for were actually received; and of course most fundamentally one person could conduct the whole pseudo-procurement process and authorise payment of large invoices without anyone else being involved or approving the spend. “Separation of duties” and all that.

This was not a sophisticated fraud. It was enabled by an incredibly weak process that was wide open for exploitation by anyone with a modicum of intelligence (and a lack of morals).  Personally, I would fire the CFO and the Procurement Director at the Trust for allowing this money to be stolen so easily.  But this is the case in so many organisations and so often – basic precautions against fraud are simply not put in place. Is it ignorance, laziness, or maybe a management team that wants to leave the door open just in case they want to do something dodgy themselves? Who knows.

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Disqualifying Suppliers from Government Contracts

It feels like the new UK Procurement Bill has been moving through Parliament for years – it is only a year in fact, although before that there was an extended period of consultation.

One of the themes of the Bill is that it should be easier for the contracting authority (CA) to “bar” or disqualify suppliers from bidding altogether. That has been possible for many years if the supplier or one of its directors had committed certain criminal acts, but the new legislation includes exclusion for poor performance for the first time.  There is also exclusion for “improper behaviour” which has led to a supplier gaining an unfair advantage in the competitive process.

However, the authority will also have some flexibility. The new rules mean that the existence of a mandatory or discretionary exclusion ground is not enough in itself to throw the bidder out of the process.  The CA has to first decide if the circumstances giving rise to the exclusion are likely to happen again. That’s quite a difficult and potentially controversial assessment to ask the buyer to make, in my view. There is also going to be a centrally-managed list of firms that have been barred.

It will be interesting to see whether there will really be any significant change of behaviour in this area. In truth, CAs are very cautious about barring firms, fearing I suspect legal challenge and endless argument getting in the way of running the actual procurement process. I’m not sure that will change.

An interesting example of this unwillingness was reported recently on the Nation Cymru website. Campaigners have accused a National Health Service Trust of ignoring anti-fraud regulations by allowing two firms that have been convicted of bid-rigging to form part of a consortium to build a new cancer centre in South Wales. The Acorn Consortium is the preferred bidder for constructing the new Velindre Hospital in Cardiff. That project has faced strong opposition on environmental and medical grounds, and it is those against the construction who have raised this issue.

Nation Cymru has described how two of the consortium members – the Kajima group and Sacyr – have been found guilty of fraud offences in Japan and Spain respectively. As the website reported,

“Kajima was sentenced for bid-rigging in March 2021, with one of its executives receiving a suspended prison sentence and the company itself being fined 250 million yen (around £1.53m) for its role in the scandal, which involved a number of firms colluding with each other on the construction of a railway line to maximise their profits. Sacyr received a penalty of €16.7m in July 2022 for its part in creating a cartel aimed at aligning bids for government contracts”.

When asked why this had not led to exclusion, a Velindre University NHS Trust spokesperson responded: “The robust procurement process has been undertaken in line with procurement law, UK and Welsh government policy and all required due diligence has been undertaken.” 

I’m not sure that’s a good enough explanation really. When the spokesperson was asked to explain in more detail why “regulation 57” (which covers this sort of thing) did not apply or was over-ruled here,  they “did not offer an explanation”.  I do think they should say more.

But conceptually it’s a tricky one. With my buyer’s hat on, do I really want to kick out what presumably is my best bidder because two possibly quite minor consortium members did something bad hundreds or thousands of miles away? On the other hand, we do have regulations for a purpose. 

In terms of the justification, having had a quick read of “regulation 57” (it’s some time since I studied “the regs”), I suspect the answer lies in the famous “self-cleaning” clause. That says, “Any economic operator that is in one of the situations referred to in paragraph (1) or (8) may provide evidence to the effect that measures taken by the economic operator are sufficient to demonstrate its reliability despite the existence of a relevant ground for exclusion”.

So basically, if a supplier can show that it has taken lots of steps to make sure it will never, ever get involved in bid-rigging again, or any of the other reasons for mandatory OR discretionary exclusion, and the buyer is naïve enough – sorry, I mean if the buyer analyses those declarations and decides they are valid, then the supplier is back in the game.

You can see the logic in this, but it is a bit of a “get out of jail” card really. It’s also another reason why in practice, we so rarely see suppliers barred. It will be interesting to see whether anything changes once the new Bill has been implemented – but I have my doubts. Barring is potentially just so fraught with hassle and risk.

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NHS Insourcing Contracts – Conflict of Interest alert..

Imagine you are a Head of Procurement. Workload is growing and you are suffering from staff shortages. Your team can’t keep up. So you go to your boss with a proposition. You and a handful of the team are prepared to work a few evenings in order to catch up with the work. But the firm will pay your own limited company, Procurement Excellence Ltd, on an outsourced service basis. Maybe £100K’s worth or work should help get up to date.

It would be interesting to see the reaction of the firm, but I suspect the Head of Procurement might not be in their post for long after that. However, a parallel situation in the UK’s health service has led to hospitals contracting with their own medical staff in exactly that manner. And that cannot be acceptable.

A report in the Observer over the weekend revealed that UK NHS health Trusts are paying businesses owned by their own doctors to perform services, often using the Trust’s own facilities.

“At Manchester University NHS Foundation Trust, three top surgeons including a clinical lead and a former clinical director are the owners of Fortify Clinic , a company offering “end to end” services to tackle waiting lists. The firm was paid £1.3m by the trust for work in 2022.”

In another case, a Sheffield firm owned by three consultants (doctors) was sold to a private health provider for £13 million after winning a number of these “insourcing” contracts. Trusts are facing long patient waiting lists and declining standards of care and public health in the UK following Covid. Strikes by nurses and ambulance staff don’t help either. So these private firms carry out operations “out of hours”, in the evenings and weekends, often using the Trusts’ own facilities and sometimes even some of their own staff. But the firms are paid as external suppliers.

One driver of this is the pension situation for high-earning individuals, including many doctors. The “lifetime cap” on pension pots means that a doctor might face a crazy marginal tax rate if they earn “too much” and their pension contributions breach the limit. But if the money flows into a business, it can be managed in a more tax-efficient manner, presumably.

Although the pension situation is pretty stupid, it does apply to everyone, not just doctors. The government should address it – but doing do just for medics would rightly bring cries of “unfair” from others in a similar situation. But the tax position is no excuse for hospitals agreeing to this approach, which is fraught with problems.

The conflicts of interest are obvious and significant. Trusts are awarding contracts – without competitive process, I suspect – to their own “friends”.  The decision-making “buyers” are almost certainly close to those benefitting from the contracts. There are also conflicts for the medics involved. There may be less incentive for instance to work harder, more efficiently or rapidly if you know you will get a substantial contract and more income if the backlog of work grows rather than shrinks. And are the hospitals charging these firms for the use of their facilities? They should be, otherwise external private healthcare providers could cry “foul” for unfair procurement.

I worked in a factory one holiday when I was a student, making insulation for pipes (I’m pretty sure it was asbestos, but that is another story…) Work pretty much stopped after lunch on many Friday afternoons, just to make sure there was overtime for those who wanted it on Saturday. I’m not suggesting a surgeon would do the same quite as overtly, but even if they resist the temptation, a conflict of interest has been created.

It is also just another step towards the privatisation of the NHS. What is interesting is that this is not being driven by some secret political strategy. It is being driven by incompetent political management, resulting by staff within the NHS taking action in their own interest (and sometimes that of the patient too) that is leading to a de facto two-tier health service. It has already happened in dental services; now we are seeing it more widely, as more and more people who can afford it “go private”.

If you see a consultant (doctor), and they tell you that the waiting list within the NHS is 6 months, but they could do it for you privately next week, in the same hospital, using the same excellent facilities, for a few thousand pounds, what do you say? But if the doctor’s firm is making large amounts of money out of this, can they really offer unbiased advice – “Doctor, will my condition get worse if I wait six months for NHS treatment”? What are they going to say?

Finally, are procurement teams involved with this at all?  I’d like to think some might have pointed out the st issues. If not, perhaps they should start now.

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NHS Procurement Platform – Was it Bought Properly?

The UK National Health Service is one of the largest organisations in the world in terms of number of employees and its running cost. Whilst it is a single organisation in some senses, really it is made up of thousands of smaller organisations, many with considerable levels of autonomy. Even when we think about hospital trusts, each still has its own Board and is set up as an independent entity from a legal perspective, although that is slowly changing with the introduction of the regional Integrated Care System model.

So it is not surprising that over the years, there has always been tension in procurement between the urge to centralise and control more from “the top” (whatever structures might be defined in that way) against the desire for local autonomy and power.  Now no-one would argue for total centralisation (everything needed by every hospital bought from a huge central office somewhere) or total decentralisation (every doctor or hospital negotiating its own deals for pharmaceuticals!)

But getting the balance right has proved difficult. For instance, Ministers persist in claiming “the centre” did a good job in terms of pandemic PPE procurement. But the truth is that pre-pandemic central procurement strategy proved inadequate, and local action was needed to maintain supply in many hospitals. And whilst once the pandemic was underway some central activity was necessary, mandated central buying cost the UK billions in waste and super-profits for suppliers.

The new Chief Commercial Officer for the NHS, Jacqui Rock, who sits in NHS England HQ, recently launched a Central Commercial function for the NHS. A key strand of that is a technology initiative that is designed to help the manage procurement better across the system. The aim is to have a more common approach to procurement, and to start enabling better access to spend data across the whole network. That is a very sensible aim – gathering data does not mean in itself a more central approach to category strategies, and however you want to approach procurement, having good data is essential.

The mechanism for achieving this has raised some eyebrows though. Via Crown Commercial Services, all trusts, integrated care boards and other NHS entities can now use a software platform provided by Atamis, with CCS funding that to the tune of £13 million over three years (it is not clear if CCS has actually “pre-bought” licences here, which could be a risk in itself).

Atamis is a procurement and tendering platform with spend analysis functions as well as tools for managing programmes, tenders, contracts, and supplier relationships. It was chosen for use by NHS England and the central Department two years ago, although NHS Supply Chain chose software firm Jaggaer for their similar requirements.However ,this new contract with Atamis was put in place using the government’s Digital Marketplace, a set of frameworks that gives the public sector access to thousands of suppliers. And it appears that no competitive process was used to choose Atamis. They were simply awarded the contract. Now there are rules (laws) about when you can award a contract in that manner without seeking proposals from other firms also listed in the Marketplace. And I cannot see in this case how a “single tender” can be justified, when there are other firms on the framework who provide similar products and indeed supply many Trusts already.

I should say that I have no axe to grind with Atamis or their product. When I worked at Spend Matters, I had contact with the founder of Atamis and liked him and the business. But the firm was sold to a Canadian software company last year, and the NHS could represent a considerable proportion of their business.  There are also questions about what happens once the 3-year CCS funding ends, dependence (the Atamis product is built on the Salesforce platform) and “lock-in” to Atamis.

When the initiative was announced, there were a whole host of interesting comments from readers of the HSJ (Health Service Journal). This extract from one probably encapsulates much of the content.

“Why has the centre decided to create a monopoly situation, by endorsing, promoting and funding this only provider for, say contracts management? What happens to other providers with better value solutions? Should UK Tech Plc pack up and shut shop? Are these other solution providers now out of the whole NHS market? Why”? 

For me, the most fundamental question is whether it was legal and commercially appropriate to award the contract to Atamis without competition. (There are “business issues” too of course). The new central function should set a good example, and surely competition is the most fundamental principle of good procurement. But given the way the contract was let, I would not be surprised if we see challenges to that process from other suppliers who are clearly at a competitive disadvantage now, with Atamis being available “free”.  

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NHS Digital Breaks the Rules, Shows Naivety

The vexed question of conflict of interest in public sector procurement came up the other day with reports that a senior executive in the National Health Service digital team had been doing rather well out of that organisation.

The HSJ reported that NHS Digital (NHSD) paid over £3 million to a small technology firm, Axiologik, one of whose owners was working as a Board-level interim director in the organisation.

“The money was paid to Yorkshire-based tech support company Axiologik, whose co-founder and director Ben Davison also served as NHS Digital’s executive director of product delivery – for which he received annual pay of £260,000, working as a contractor, in 2020-21.”

A number of issues arise from the HSJ investigation. Firstly, it appears that no other candidates were considered for the position when Davison was appointed. That seems odd, to say the least.

Then nine months after his appointment, Axiologik was appointed to provide programme management support for the Covid booking service, followed by more work (according to HSJ)  “to lead NHSD’s “tech and data workstream” which involved “portfolio level executive leadership across citizen-facing digital services” run by NHSD such as the NHS App, NHS.uk website and 111 Online”.

In the current year, turnover of the firm is set to grow from £6.5 million to £15m, not surprisingly. NHSD say that they put measures in place to avoid conflicts of interest – Davison had no involvement in the procurement process, or delegated authority for contracting or spend approvals. But as a top-level interim executive, how could he hold a supplier to account in any meaningful way if he was also a director of that supplying firm?  

Another issue arose because Davison was paid in the £260,000 – £265,000 band in 2020-21 according to the NHSD accounts, making him the highest paid person in the NHS.  But there is more. The Treasury then got involved because his appointment broke the rules on getting approval for contractors who work for more than six months!  (The engagement of two other NHSX contractors also broke the rules). That led to Treasury withholding £645,000 of allocated funding to NHSD because they have been such naughty boys and girls.

But perhaps the most important question is this. Was Axiologik appointed after a competitive process?  The HSJ does not make that clear – presumably because they do not know – although they report that the firm was appointed from the government’s G-Cloud framework.

There are many frameworks used in the public sector covering a wide range of goods and services. They enable users to bypass much of the formal “legal” public procurement process and can be very useful when used properly, retaining the ability to achieve value for money but simplifying the process. The Cabinet Office’s Crown Commercial Services (CCS), which runs G-Cloud, is the biggest manager and promoter of such contracts.

But too often, frameworks are being used today to award contracts without any real competitive process, leading to potential shortcomings in terms of value or even corruption.  In most cases, for example, users should (legally) run some sort of competitive process between at least some of the firms on any given framework to select the supplier that can provide best value. But in practice, users at times just pick their favourite and justify it on spurious grounds that “they are clearly the best…”

Some framework managers don’t really have an interest in whether the process is run properly either. They make their money as a percentage of the spend through their frameworks paid by the supplier, so CCS for instance is targeted on increasing its “sales”. If they put controls on usage, or police this issue of further competition too strongly, then users might just switch to another framework and CCS loses income. Indeed, the funding of CCS and other major framework managers leads to a range of perverse incentives in terms of ultimate taxpayer value – something I’ve been saying for many years.

Anyway, to be fair, we don’t know whether Axiologik was engaged without a competitive process, so maybe all this is irrelevant here. But in any case, someone at NHSD was very naïve about conflict of interest issues, and very ignorant when it comes to Treasury rules on interims. So definitely a contender for the next volume of Bad Buying!

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Private Eye Identifies Covid Profiteering and Procurement Naivety

In the current issue of Private Eye magazine  – only on sale for another few days so hurry if you want to buy it – there is a special 8 page supplement titled “Profits of Doom”, covering the “bad buying” that went on in UK government around the pandemic, principally PPE (personal protective equipment), but also test kits and the track and trace programme.

Several procurement leaders get a mention, including Gareth Rhys Williams, Government’s Chief Commercial Officer, and Steve Oldfield and Ed James at the Department of Health.  I suspect there are others who actually had more to do with the PPE procurement waste but have escaped that attention …

If you have followed these stories in the media and on this website to some extent, much of the Private Eye report won’t be new to you.  But putting it all together does increase the sense of anger that most of us will feel about the vast sums of money extracted from the British taxpayer by certain firms and individuals, in return for very little effort. According to the magazine, one firm, Primer Design Ltd, went from a profit of £1.3m a year before Covid to making £178.2 million in the first Covid period.

Individuals did well too. Andrew Mills, who had been an adviser to government himself, made £32.4 million for doing very little as a middleman for Ayanda Capital, whose bosses also made tens of millions on PPE supply. Even the consulting firms raked in the cash working on various covid related tasks including the pretty useless track and trace programme, with Deloitte partners making record earnings of around £1 million each last year.

It is clear that cost really didn’t matter when the PPE shortage was at its worst last year, and to some extent that is understandable.  There is still some mystery about the demand forecasts that led to chronic over-ordering; that factor alone cost the taxpayer billions, but there has been little real insight into what went wrong there.

But why the procurement teams didn’t at least try and examine the margins made by the middlemen and agents, I don’t know. If the buyers had insisted on seeing a price breakdown, or set a maximum mark-up over factory gate prices, would Andrew Mills and others really have walked away from the deal?  They won the contracts in the first place because of their political connections that got them onto the “VIP route”, which gave priority to their supply proposals, so it is hard to see that they could have instantly taken their offer to another country.

Instead, they were allowed to make tens or hundreds of millions in profit by exploiting the naivety of the procurement operation, which seemed to focus almost entirely on just buying as much stuff as possible. Then we have the Randox contracts for test kits and analysis, where the picture is even murkier. Member of Parliament Owen Patterson was paid as an adviser by that diagnostics firm, and records of calls between him, the firm and health Minister Lord Bethell, have been “lost” apparently.  Randox was given £600 million worth of contracts without any tendering or competitive process. And it won a testing contract worth £133m, just days before government officials confirmed it did not actually have enough equipment to deliver the work, according to documents now released.

It would be good to think that some of those who profited from the pandemic and in effect took advantage of the taxpayer might lose friends because of their actions. But the culture in the financial world and “the city” is such that I suspect they will be celebrated as great examples of entrepreneurial spirit, exploiting a situation (and their connections) cleverly to make money.

Even if there wasn’t overt brown-paper-envelopes-type corruption here (or none that has been discovered yet, at least), sometimes it is just very easy to hate capitalism!

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Incentivising Suppliers Properly Isn’t Easy – Doctor’s Appointments Provide a Great Example!

How do you go about incentivising suppliers within a contract to perform in the manner you REALLY want them to?

The complications tend to come in contracts for services, rather than goods. Where you can write a specification that clearly defines the item you are buying, then it is enough “incentivisation” usually to say “supply that precise thing and you will get paid”.

But if you are buying a service, particular a more complex service, such as consultancy, outsourced customer handling, software development, or even facilities management, then making sure the supplier acts in the way you really want them to can be challenging.

An example of this has been much discussed in recent weeks in the UK media.  Our GPs, the “family doctors” who are the first line of contact for most medical problems, moved most of their consultations online when the pandemic struck last year. Now they are being criticised for not getting back to in-person appointments quickly enough, and generally for making it difficult for patients to get appointments at all. But GPs are actually private contractors. Many people in the UK see them as part of the National Health Service, which they are operationally, but they actually work for the NHS under what is in effect a contract for services. They are suppliers.

In reality, there are a number of factors driving this appointments problem. This is a very stressful job, and the proportion of women working as GPs has grown dramatically in recent years. So for both their own health and for work-life balance reasons, more GPs are working part-time, so the capacity of the system is arguably not high enough. There is also a backlog of medical problems that weren’t sorted out during the worst of the pandemic, so there is more demand on the system than ever.

But certain newspapers, and the Minister for Health, Sajid Javid, have decided that there is capital to be made by blaming the doctors themselves for being “lazy”.  Aside from the issue of whether the buyer (Javid) should be having a go at a “key supplier” (the doctors) in public, there is much  discussion around how GPs are paid and incentivised. 

An article in the Daily Mail recently suggested that instead of being paid in the main based on how many people are on the GP’s “list”, they should be paid based on how many appointments they actually carry out.

“It may be time to move from a bulk payment per patient to a per appointment funding structure, to encourage doctors to actually see patients as quickly as possible”.  That was the quote from Matthew Lesh, head of research at the Adam Smith Institute (the free-market-promoting thinktank),  who from his LinkedIn profile would seem to be a very bright young man. Yet it doesn’t take too long to see the incentivisation flaw in his argument.

A per-appointment system would encourage less scrupulous doctors to pack in as many appointments as possible. Currently most people only get ten minutes or so with the GP, but that could be squeezed further if some doctors were tempted by a direct increase in revenue from that approach. And for doctors with a conscience, who want to take the time necessary to get a diagnosis right, you are placing their ethics into direct conflict with their bank balance.

Now that’s not to say that the payment by list size is necessarily the best option., and there is no simple, magic solution here.  Arriving at an appropriate mechanism is challenging; for instance, the same size list of patients in socially and economically deprived Blackpool might generate a lot more work than the same in Wokingham. And of course throughput has to be balanced with the rigour of the doctor’s work. But we might imagine a set of KPIs (key performance indicators) which might be combined in some way to drive GP payments.

In any case, this all reinforces that getting incentivisation right is tricky. That applies whether we are talking about an outsourced customer service call centre, roads maintenance contracts (see examples of both of these services going wrong in the Bad Buying book) or getting our front-line doctors to contribute in the best possible way to the health of the nation. So beware simplistic solutions.

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